Special Economic Zones in Ukraine — A Means of Promoting Investment?

Abstract

AbstractThe purpose of Special Economic Zones (SEZ) in transformation countries is to give speedy and consistently free rein to market mechanisms in demarcated regions. This paper does not set out to answer the question as to whether SEZ are an efficient means of fostering investment. The question is: What must a SEZ be like in order to act as a stimulus to investment? And then: Do Ukrainian laws and draft bills meet these requirements? But for a proper assessment of the criteria on which we must base our answer to this question, let us first briefly weigh the pros and cons of SEZ: The arguments in favour of SEZ are: exemplary function - the zone as a model for the entire country; instructive experiment - mistakes can be remedied before causing damage throughout the country; implementation guidance - legislation can be implemented and put into practice more quickly; stability function - the impact of opposition to reform can be more effectively curbed in a restricted area; and buffer function - investors wishing to set up operations but perceiving the nation-wide risks as still too great stand a chance of finding a manageable situation. The arguments against SEZ are: equal investment conditions in all parts of the country (i.e. deregulation of the overall market) is an alternative to SEZ; the establishment of SEZ involves considerable expenditure on establishing various authorities and developing infrastructure; and for their success to be demonstrable, SEZ must be established as long-term facilities. To establish confidence, this long-term commitment must be abided by, even if the hoped-for successes fail to materialise. KeywordsForeign Direct InvestmentReal EstateSpecial Economic ZoneAdministrative AuthorityPromote InvestmentThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.